What receipts should a small business keep
The rule of thumb is simple: keep proof of every income and expense you report, and keep it long enough to answer a question about that year. Here is what that means in practice.
What the IRS actually needs
For each expense, your records should show what you bought, the amount, the date, the vendor, and the business purpose. A receipt is the best proof, but a bank or card statement combined with a note can also work. For travel and gifts, the IRS asks for more detail, and for lodging a receipt is expected regardless of amount.
Receipts and records worth keeping
- Supplies, equipment and software: receipts and invoices, including large purchases that may be depreciated
- Meals and travel: the receipt, who was there, and the business reason; airfare, lodging and car rental receipts
- Vehicle: a mileage log, or gas, repairs and insurance if you use actual expenses
- Home office: rent or mortgage interest, utilities, insurance and a floor plan or measurements
- Contractors and employees: invoices, signed W-9 forms, 1099s and W-2s, payroll reports
- Income records: invoices, deposit slips, 1099-NEC and 1099-K forms, and sales reports
- Assets: purchase documents and depreciation records for as long as you own them, plus the tax years afterward
- Bank and card statements, loan documents, and tax returns with their supporting schedules
How long to keep them
- Three years from the date you file in most cases, the period in which the IRS can generally audit a return.
- Six years if you left out more than 25 percent of your gross income.
- Seven years for claims of a loss from worthless securities or bad debt.
- Four years after the tax is due or paid for employment tax records.
- Indefinitely if you did not file a return or filed a fraudulent one.
- For property, until the period of limitations expires for the year you sell it.
Paper versus digital
The IRS accepts electronic copies as long as they are legible, complete, and stored in a way that lets you find them and reproduce them on request. Photographing a receipt and shredding the paper is fine for most receipts, but keep originals of anything that has legal weight, such as contracts and titles.
A simple system
- Capture every receipt the day you get it, with your phone camera or by forwarding email receipts.
- Match each one to the bank or card transaction it belongs to.
- Add the business purpose where it is not obvious.
- File by year and category, with backups in a second place.
Common questions
Do I need a receipt for every small purchase?
For most business expenses under $75 a bank record with a clear note may be enough, but receipts are the safest proof and are easy to capture on your phone.
Is a credit card statement enough?
It proves a payment was made, but not what was bought. Pair it with a receipt or a note of the business purpose whenever possible.
Sources and method
Figures and rules in this guide come from the IRS publications below. We check them against the current versions when we review an article. Examples use round numbers for illustration.
This article is general education, not tax or legal advice. Retention rules vary, so confirm with a tax professional. Ledger organizes information and prepares it for review. Estimates depend on the information you enter, so review tax information with a qualified professional.
Put it into practice
- Use Ledger to organize receipts and deductions.
- See Ledger as small business finance software.
- Compare Ledger and QuickBooks.
- Read how Ledger protects your data.